Cyclone Power Technologies Releases Year End Progress Letter to Shareholders

POMPANO BEACH, FL--(Marketwire - Jan 2, 2013) - Cyclone Power Technologies (OTCQB: CYPW) has released the following year end progress report to its shareholders:

Dear Shareholders:

Happy New Year from South Florida!

As we transition into 2013, we want to provide you with a recap of Cyclone Power Technologies' many achievements over the past year. We have made great progress developing our business, building our technology and refining our corporate structure. Some areas still require work in order to achieve our goals. In this effort we have identified areas that need strengthening and have made or are making changes to correct them. We are optimistic about our future prospects and believe that when provided with the facts about our accomplishments and advances in 2012 you will be too.

Revenue & Profitability

Forecasted $350,000 in revenue in Q2 2012: Achieved

Forecasted $500,000 in revenue in Q3 2012: Achieved

Forecasting over $1.1 million in revenue in 2012: Will achieve

Goal to achieve operational break-even: In progress

We are pleased to have met our revenue forecasts for Q2, Q3 and expect to meet our FY 2012 forecast of $1.1 million. Our revenue growth is a solid sign that we are on the right path. Achieving operational break-even by Q4 2012 was admittedly a lofty goal, but a good one to aim for. This target required us to analyze our true costs of operations and how we generate revenue from our contracts. We also greatly refined our business model, corporate structure, and internal operational procedures. We believe that we now have a strong plan in place which will get us to that break-even level over the following year.

Engine Delivery & Development

Delivery of engines to Raytheon in Q2 2012: Achieved

The Raytheon engines delivery was an important milestone for Cyclone, and we are pleased to have achieved it on time and within budget. With the current military requirements and funding in this sector uncertain, it is hard to tell right now how this particular project will proceed. We maintain a good relationship with our engineering leads at Raytheon, and expect to continue to develop solutions for the undersea power and propulsion sector in the future.

This was another important technological milestone for Cyclone. Integrating any two new technologies takes time. In doing so with the WHE-25 and the novel steam generation system developed for the Phoenix waste oil furnace, we experienced pumping, water flow, cooling, controls and other hurdles to overcome. We are now achieving consistent, even system runs that look very encouraging. We initially anticipated a Q3 2012 completion of this project. Now armed with a better understanding of the many intricacies involved, and with recently added support and expertise, we estimate that completion for this integrated system can be achieved early in 2013. We then plan to work with our partners to harden and refine the system for in-field demonstrations, estimated to commence in the summer of 2013.

Ramp-up production capabilities for additional prototype engines: In progress

Our recently announced Letter of Intent to form a Joint Venture with Ohio-based Precision CNC (PCNC) is a major step forward in this plan. PCNC has the capabilities, including precision machinery and talented personnel, to help us finalize prototype designs and start small-scale manufacturing of engines in 2013. Furthermore, a base of operations in America's mid-west allows us to recruit production engineers that strongly complement the inventive skill sets of our Florida team, as well as align ourselves with other engine / automotive engineering firms and major research universities. We also believe that Ohio, a state strongly supportive of manufacturing, can provide additional funding for job creation and training in the near term.

Secure the alliances that will add value to our engine technology: Achieved

We have secured teaming and development agreements for electric generators with Aura Systems (which recently received a $100 million contract from the Government of Korea to provide small gen-sets), for biomass gasifiers with Enginuity Energy, and for methane combustors with B&W Construction. In 2013 we expect to complete integrated demonstration units with each of these partners and commence pilot sales to customers.

Form partnerships in Australia and Europe to sell engines worldwide: Achieved in Australia

In Q3 2012 we signed a teaming agreement with Clean Carbon, a company dedicated to transitioning new technologies for the agricultural sector into Australia. We are now working closely with this group on several potential opportunities to advance development and ultimately lead to the manufacturing of our engines or systems in that region. We are in discussions with several European groups, and believe that we can firm up a strong partner for that region in 2013. With respect to our Chinese licensee, we understand that limited capital has delayed their overall operations, and as a result, we will need to reevaluate and possibly restructure that alliance in 2013.

Meet key development milestones under our U.S. Army contract: Achieved

We have completed on time and within budget the first two milestones under our $1.4 million contract with the U.S. Army / TACOM, and are on track to hit our third milestone in January 2013 ahead of schedule. We believe we have developed a very good working relationship with our contracting officers at TACOM. We are presently working on securing Phase 2 funding to continue development in 2013-'14 of this ultra-compact, multi-fuel 10kWe power generator for combat vehicles and mobile military or emergency operations.

Claim the land speed record for steam powered vehicles in 2012: In progress

We have made great progress on our land speed record (LSR) vehicle this year. Starting in June, we built from scratch a new chassis and state-of-the-art streamliner body. We unveiled these achievements at the Performance Racing Industry Show in Orlando to a great reception from industry players and media. We have seen over 100hp from our Mark 5 engine on the dynamometer, and are now hardening this engine for racing conditions. Actual running of the LSR car, however, has been delayed due to several factors -- money, manpower and materials. We are trying to complete this project through sponsorship funding and not corporate funds, and that takes longer. With our manpower, paying customers and revenue generating contracts will always have priority. Finally, our receipt of some specialty materials was delayed outside of our control, requiring us to find alternative suppliers and develop novel build methods, both of which we have done. At this time we are not providing a new deadline on completion of the LSR project, other than to say that we will get it done.

We remain committed to the LSR project and the greater corporate purpose behind it. Commercialization of our high-efficiency, high-temperature, super-critical pressure engine (i.e., the Mark series of engines), especially for complex systems like automobiles, will require more money and resources than we currently have access to. Therefore, we must attract strategic partners to provide non-dilutive funding and skill-specific expertise to the project. These partners understand the value that racing programs provide, not only in terms of market visibility, but also in-field development and testing for new technologies. We are confident that our push to demonstrate and validate our engine with a land speed record will be successful in achieving this broader goal for our shareholders.

Commence work on the Mark 5 engines for Combilift: Achieved

We began work on the Combilift engines in Q2 2012 as scheduled. We estimated delivery of these engines by the end of 2012, which has not been achieved. The development path for the Combilift engines follows the LSR engine; however, the complexities and operational requirements for Combilift engines are greater. To assist us in moving this project towards completion, we have recruited contractors with expertise in certain areas such as condensing systems. We are confident that we can start delivery of engines to our customer in the first half of 2013.

Corporate Development

Expand team and facility: Achieved

We have brought on some very strong people in 2012 to support our technological growth, including our VP of Engineering Karl Peterson. To keep costs down we made the decision to remain in our current facility in 2012, as opposed to moving to a larger one. We have expanded the working and inventory space in our shop, and added a closed-in machining area with new equipment to expedite one-off parts production and reduce third-party costs. We have also hired a talented machine operator to oversee these operations.

Complete financing required to fast-track development: In progress

Securing sufficient financing in a manner that limits dilution and maximizes shareholder value is a challenge for any small company, especially in this economy. We made the decision in Q4 to delay a registered offering for the primary reason that we felt it would not be best for our shareholders at that time. With the progress we have made over the last year, including important refinements to our business model, we believe that we can secure the right financing for our needs in 2013.

Continue up-listing of our stock to a national exchange: To be revisited in late 2013

We will move our stock off the OTCQB when the time is right. Listing our stock on a national exchange is an important goal of ours. We will pursue this aggressively when we know we can support initial and continuing listing requirements in a manner that fully increases shareholder value.

Our company is focused moving into 2013. We know that the waste-to-energy sector presents an enormous opportunity for our engine technology, and we have set in place the production plan, alliances and market studies to support this path. We are confident that our strategy to attract major partners for our Mark series of engines in automotive and other sectors through the LSR program will prove successful. We feel certain that we will complete our project with the military on time and within budget, which will open new opportunities for us with this major customer. We believe that the milestones we are hitting and the business plan we have formed will result in long-term funding to move Cyclone and its technology to the next level. Finally, we are committed to assuring that these steps will translate into revenue and appreciation of shareholder value.

Thank you for your support over the past year. We look forward to a very successful 2013 and beyond.

Sincerely,
James Landon
Chief Executive Officer

Safe Harbor Statement Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. The company cautions that these forward-looking statements are further qualified by other factors. The company undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise.

About Cyclone Power TechnologiesCyclone Power Technologies is the developer of the award-winning Cyclone Engine -- an all-fuel, clean-tech engine with the power and versatility to run everything from waste energy electric generators and solar thermal systems to cars, trucks and locomotives. Invented by company founder and CEO Harry Schoell, the patented Cyclone Engine is a eco-friendly external combustion engine, ingeniously designed to achieve high thermal efficiencies through a compact heat-regenerative process, and to run on virtually any fuel -- including bio-diesels, syngas or solar -- while emitting fewer greenhouse gases and irritating pollutants into the air. The Cyclone Engine was recognized by Popular Science Magazine as the Invention of the Year for 2008, was included in a 2011 report by Popular Mechanics as an important waste energy technology for the future, and was twice presented with the Society of Automotive Engineers' AEI Tech Award. Additionally, Cyclone was named Environmental Business of the Year by the Broward County Environmental Protection Department. For more information, visit www.cyclonepower.com.